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Why an Interest Only Lifetime Mortgage Calculator is The Starting Point for Your Research

Thursday, February 26th, 2015

Are you sure an interest only lifetime mortgage is the best product for you? Are you even sure any lifetime mortgage is correct for you? Entering retirement can be a daunting prospect when you are cash poor, but asset rich. You want to know you have a place to live, plenty of money to live on, and can enjoy the retirement you worked so hard for. Equity releases like lifetime mortgages can help you enjoy that life if it is the right product for your situation. However, there is no ‘one product fits all’ scheme out there. There are choices like interest only lifetime equity releases, enhanced equity release schemes & new voluntary repayment plans. Each comes with their own set of USP’s and these are what you need to ascertain in order to discover which the best equity release scheme is for you.


The Interest Only Lifetime Mortgage Advantage
An interest only lifetime mortgage provides you with retirement funds, where you borrow a capital lump sum and in return pay a monthly interest-only amount. This amount can be the full interest that accrued, or in some cases only £25 per month. It depends on your budget and what you can afford. If you pay the entire interest that accrues per month then the principle balance remains the same for the life of the mortgage. At death or moving to an assisted living facility, you would repay the principle balance at that point. Any equity left in the home would be inheritance for your family. The advantage is keeping a little inheritance for your family versus spending it all on your retirement and the repayment of the loan.


Starting with the Interest Only Lifetime Mortgage Calculator
Now that you understand what an interest only lifetime mortgage offers, you need to find out if it is an affordable option for you. There is no point in speaking with any lender of these mortgages if you cannot afford it, or afford the £25 per month minimum interest payment. An interest only lifetime mortgage calculator can help you determine if you can afford the mortgage. For some you may not be ready to speak with a qualified specialist.


Others have spoken with a qualified specialist and received a value that seems like they should accept it. In fact there are many who accept the first offer they receive from one of the big providers of the loans because they believe it is the best option. Yet, they never once use an interest only calculator to see the potentials from other companies. This is where professional equity release advice is needed to compare the whole lifetime mortgage & home reversion marketplace.


Big companies have done well to establish their equity release brand. They have great marketing skills and the advertising budget to keep in the limelight. However, it does not mean they offer the best products for everyone including on their interest only lifetime mortgages. The only way to find out who has the best is by using a calculator to determine what other companies are able to offer you. There are all-in-one calculators from the likes of Equity Release Supermarket that look at all equity release plans and then provide a table of different mortgage lenders. In this way you can access all the estimate data you need to make an informed decision.


What Inputs are Required for the Calculation?
Now that you understand the reason for starting with a calculator to determine the estimate and potential equity release options, you need to understand what the calculator will ask for and why. You will be asked for your full name, phone number, email address, age, health, and property value from some of the best calculators. Some may only ask for your personal data and then say the information is in the email—this is data mining and of no help to you. You want a calculator that gives you instant results and at least asks for your age, health, and property value. This is all a calculator needs to offer accurate results.


Your age determines your life expectancy. Your health if good or poor determines if you will live longer or shorter than the average healthy person. There is also the assumption that males live shorter lives than females, so some calculators even want to know this distinction or if you are a couple in which case the age of the youngest homeowner has to be used in the calculator.


The age and the property value determine the loan to value percentage or estimate of funds you can unlock in equity. The loan to value is only an estimate based on the information you supply to the calculator. If you do not have an accurate property value, then you will have an inaccurate estimate. Zoopla and other websites can help you find as close an estimate to accurate property value as possible.


An important factor is making sure you use an interest only calculator or all-in-one when you want to find out about interest only loans. The calculator has to determine the estimate based on the amount of interest you will pay back each month versus property value. In this way the calculator can tell you if you can take more or less based on the estimated interest payment. It also leads to the decision of whether the loan is the right equity release for you.


The Next Steps in your Interest Only Lifetime Mortgage Calculation
After you determine that a lifetime interest only mortgage is right for you, you need to take the next step in looking at comparison tables and finding the best equity release company for you. You have a potential value that is as accurate as possible given the data you had to input into the calculator.


Now you know if you can afford the loan and if the interest payments are possible. When you speak with a company about interest only lifetime mortgages and calculator results, you can ask questions about their differences in calculations as well as some of their qualification criteria. You can also find this online and use comparison websites to see the typical estimate for your age, health and property value.


Make certain that you have an informed decision so that you can speak with a qualified equity release representative to obtain the best possible interest only lifetime mortgage for you. You may also need to wait till you are slightly older to get better results, at least with a calculator you will know. But as long as you have reached the age of 55, then a lifetime interest only calculator & mortgage is available to you.


Popular Types Of Equity Release For Retired Homeowners

Sunday, December 12th, 2010

It is only normal for people to want an adequate income to support themselves in financially uncertain times, such as the present.

Unfortunately, not everyone can get access to this income easily, especially homeowners who have retired. Having been on employed income for most of one’s life & then seeing a drop in income can be daunting. The good news is that the FSA has permitted ways for homeowners who have retired to gain additional income or capital lump sums through the equity in their homes.

The result of this is equity release, where homeowners over 55 years of age can gain income from the value of their homes.

There are different equity release schemes from which homeowners can choose depending on their preferences. Here are some of the schemes offered to homeowners through equity release.


Lifetime mortgage – This equity release scheme involves arranging monthly income or getting a lump sum from the equity of your home. Once the equity has been released. there are NO monthly repayments to make with these type of plans. The interest is instead rolled-up & added to the balance on a yearly basis, escalating to the extend of roughly doubling the balance every 10-11 years.

Home equity release therefore has the effect of reducing your beneficiaries inheritance & as a consequence it is always advisable to involve your children in the equity release process & decision making.

At the end of the term of the mortgage term, which will once the second person has died or gone into long term care, the lender can use their calculator to ascertain the redemption figure. The loan is then repaid once the property has been sold which most equity release UK companies will allow 6-12 months for this to happen. Therefore, even in today’s depressed property market there should be ample time for the property to be sold at the best price possible.

Depending on the equity release interest rate & how much was originally borrowed will determine the final balance to be repaid.


Home reversion – with this scheme, the reversion company will actually buy a share of a property. This can be anywhere upto 100% of the property value. In the meantime, a lifetime tenancy agreement is made which allows you to live rent free for the rest of your life. (This must NOT be confused with non-regulated sale & rent-back schemes which do not offer this feature). You make an agreement with the home reversion provider to keep the property in good condition for the duration of the term.

At the end of the day, (death or long term care) again the property will be sold. The amount the reversion company will require will be the percentage that was sold to them. Therefore, if 75% of the property value was sold to the reversion company, then 25% of the sale value will be retained by the homeowner. This has the major advantage over roll-up lifetime mortgage schemes in that your beneficiaries will know exactly what amount of the property value they are to receive.


Shared appreciation mortgage – There are some lifetime mortgage schemes that allowed homeowners to share the increase in home value. This can make a huge difference to the final outcome in a time of quickly increasing house prices. These plans are no longer sold & were withdrawn in the 90’s.  Such schemes do still exist are subject to review.

The worked by instead of charging interest for the loan, the bank could usually take anywhere up to 75% of any house price rises over the life of the mortgage. However, house prices escalated significantly over the next decade & meant that people who took out these plans ended up owing the banks hundreds of thousands of pounds.

Despite house prices falling over the past 18 months, the average house price has still risen by over 100% from the late 1990’s, to date. This has left many elderly borrowers unfortunately marooned in their homes. The reason for this is that any reason for them selling the property, such as a move into residential care, would trigger a massive payout to the shared appreciation mortgage lender leaving people with no funds to move forward. Companies such as Barclays & Bank of Scotland were the main protagonists in this equity release arena.


Before entering into any equity release scheme, always seek independent financial advice.

Call freephone 0800 678 5159 to speak to one of the Equity Release Supermarket team.


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